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December 11, 2019 ASU-ECN-EFL 1Hobijn -
U.S. Economic Outlook:
Cutting through the Alarmist Noise
Prof. Bart Hobijn
December 11, 2019
December 11, 2019 ASU-ECN-EFL 2Hobijn -
The R-word is on many minds
December 11, 2019 ASU-ECN-EFL 3Hobijn -
Four main sectors of the economy
Y=C+I +G+( X−M)
GDP
HouseholdsBusinesses
Government
Foreigners
Spending on final U.S. goods and services by ...
December 11, 2019 ASU-ECN-EFL 4Hobijn -
Current economy in a nutshell
Y=C+I +G+( X−M)
GDP
HouseholdsBusinesses
Government
Foreigners
Spending on final U.S. goods and services by ...
December 11, 2019 ASU-ECN-EFL 5Hobijn -
Smiley is bulk of the economy
December 11, 2019 ASU-ECN-EFL 6Hobijn -
Main takeaways
●
Economy growing at trend pace
– Recent GDP growth in line with estimates
●
Household sector keeps economy humming
– Solid consumer spending and confidence
– Improved wage gains for lower skilled (finally)
●
Uncertainty affecting business decisions
– Business confidence near recession levels
– Subdue business fixed investment
●
Limited impact of trade disputes
– U.S. a relatively closed economy
December 11, 2019 ASU-ECN-EFL 7Hobijn -
Economy growing at trend pace
December 11, 2019 ASU-ECN-EFL 8Hobijn -
Steady growth expected to continue
December 11, 2019 ASU-ECN-EFL 9Hobijn -
Accompanied by solid job growth
December 11, 2019 ASU-ECN-EFL 10Hobijn -
That keeps unemployment rate flat
December 11, 2019 ASU-ECN-EFL 11Hobijn -
Inflation expected to remain tame
December 11, 2019 ASU-ECN-EFL 12Hobijn -
Living in Low-Interest-Rate World
FOMC Participants’ Assesment of Appropriate Monetary Policy
September 18, 2019, midpoint of Fed-Funds target range
2019 2020 2021 2022 Long run
3.0
2.0
1.0
0.0
Percent(annualized)
Source: Federal Reserve Board of Governors
December 11, 2019 ASU-ECN-EFL 13Hobijn -
Household Sector
Keeps Economy Humming
December 11, 2019 ASU-ECN-EFL 14Hobijn -
Consumers feeling good...
December 11, 2019 ASU-ECN-EFL 15Hobijn -
… and seeing wage increases
December 11, 2019 ASU-ECN-EFL 16Hobijn -
Uncertainty is Affecting
Business Decisions
December 11, 2019 ASU-ECN-EFL 17Hobijn -
Business Sentiment Sagging
December 11, 2019 ASU-ECN-EFL 18Hobijn -
Business investment has slowed
December 11, 2019 ASU-ECN-EFL 19Hobijn -
Limited Impact of
Trade Disputes
December 11, 2019 ASU-ECN-EFL 20Hobijn -
Trade is small part of GDP
December 11, 2019 ASU-ECN-EFL 21Hobijn -
Trade is small part of macroeconomy
Indicator Amount Interpretation
Jobs
(exports)
11 million
Number of jobs that involved in the production of
exports of goods and services from U.S. to rest of
world.
Jobs
(imports)
15 million
Number of jobs needed to add to U.S. employment to
produce imports at current prices, wages, and
productivity levels.
Inflation 10 percent
One tenth of the price of consumer spending is due to
the cost of imported goods and services
Source: Hale, Hobijn, Nechio (2018) and own calculations
December 11, 2019 ASU-ECN-EFL 22Hobijn -
A Quick Recap
●
Economy growing at trend pace
– Recent GDP growth in line with estimates
●
Household sector keeps economy humming
– Solid consumer spending and confidence
– Improved wage gains for lower skilled (finally)
●
Uncertainty affecting business decisions
– Business confidence near recession levels
– Subdue business fixed investment
●
Limited impact of trade disputes
– U.S. a relatively closed economy
December 11, 2019 ASU-ECN-EFL 23Hobijn -
Recessions are like death...
… in this world
nothing can be
said to be
certain,
except death,
taxes,
and recessions.
… No reason to
worry a lot about
a recession now.
It will come, but
the patient is
relatively healthy.

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U.S. economic outlook: Cutting through the alarmist noise

  • 1. December 11, 2019 ASU-ECN-EFL 1Hobijn - U.S. Economic Outlook: Cutting through the Alarmist Noise Prof. Bart Hobijn December 11, 2019
  • 2. December 11, 2019 ASU-ECN-EFL 2Hobijn - The R-word is on many minds
  • 3. December 11, 2019 ASU-ECN-EFL 3Hobijn - Four main sectors of the economy Y=C+I +G+( X−M) GDP HouseholdsBusinesses Government Foreigners Spending on final U.S. goods and services by ...
  • 4. December 11, 2019 ASU-ECN-EFL 4Hobijn - Current economy in a nutshell Y=C+I +G+( X−M) GDP HouseholdsBusinesses Government Foreigners Spending on final U.S. goods and services by ...
  • 5. December 11, 2019 ASU-ECN-EFL 5Hobijn - Smiley is bulk of the economy
  • 6. December 11, 2019 ASU-ECN-EFL 6Hobijn - Main takeaways ● Economy growing at trend pace – Recent GDP growth in line with estimates ● Household sector keeps economy humming – Solid consumer spending and confidence – Improved wage gains for lower skilled (finally) ● Uncertainty affecting business decisions – Business confidence near recession levels – Subdue business fixed investment ● Limited impact of trade disputes – U.S. a relatively closed economy
  • 7. December 11, 2019 ASU-ECN-EFL 7Hobijn - Economy growing at trend pace
  • 8. December 11, 2019 ASU-ECN-EFL 8Hobijn - Steady growth expected to continue
  • 9. December 11, 2019 ASU-ECN-EFL 9Hobijn - Accompanied by solid job growth
  • 10. December 11, 2019 ASU-ECN-EFL 10Hobijn - That keeps unemployment rate flat
  • 11. December 11, 2019 ASU-ECN-EFL 11Hobijn - Inflation expected to remain tame
  • 12. December 11, 2019 ASU-ECN-EFL 12Hobijn - Living in Low-Interest-Rate World FOMC Participants’ Assesment of Appropriate Monetary Policy September 18, 2019, midpoint of Fed-Funds target range 2019 2020 2021 2022 Long run 3.0 2.0 1.0 0.0 Percent(annualized) Source: Federal Reserve Board of Governors
  • 13. December 11, 2019 ASU-ECN-EFL 13Hobijn - Household Sector Keeps Economy Humming
  • 14. December 11, 2019 ASU-ECN-EFL 14Hobijn - Consumers feeling good...
  • 15. December 11, 2019 ASU-ECN-EFL 15Hobijn - … and seeing wage increases
  • 16. December 11, 2019 ASU-ECN-EFL 16Hobijn - Uncertainty is Affecting Business Decisions
  • 17. December 11, 2019 ASU-ECN-EFL 17Hobijn - Business Sentiment Sagging
  • 18. December 11, 2019 ASU-ECN-EFL 18Hobijn - Business investment has slowed
  • 19. December 11, 2019 ASU-ECN-EFL 19Hobijn - Limited Impact of Trade Disputes
  • 20. December 11, 2019 ASU-ECN-EFL 20Hobijn - Trade is small part of GDP
  • 21. December 11, 2019 ASU-ECN-EFL 21Hobijn - Trade is small part of macroeconomy Indicator Amount Interpretation Jobs (exports) 11 million Number of jobs that involved in the production of exports of goods and services from U.S. to rest of world. Jobs (imports) 15 million Number of jobs needed to add to U.S. employment to produce imports at current prices, wages, and productivity levels. Inflation 10 percent One tenth of the price of consumer spending is due to the cost of imported goods and services Source: Hale, Hobijn, Nechio (2018) and own calculations
  • 22. December 11, 2019 ASU-ECN-EFL 22Hobijn - A Quick Recap ● Economy growing at trend pace – Recent GDP growth in line with estimates ● Household sector keeps economy humming – Solid consumer spending and confidence – Improved wage gains for lower skilled (finally) ● Uncertainty affecting business decisions – Business confidence near recession levels – Subdue business fixed investment ● Limited impact of trade disputes – U.S. a relatively closed economy
  • 23. December 11, 2019 ASU-ECN-EFL 23Hobijn - Recessions are like death... … in this world nothing can be said to be certain, except death, taxes, and recessions. … No reason to worry a lot about a recession now. It will come, but the patient is relatively healthy.